Reward programs have become the norm for many banks and customers. After all, why wouldn’t you want to earn points or cash back simply for using a specific credit card? Banks provide these various reward programs for a number of reasons including: increasing goodwill among existing customers, drumming up new business through attractive reward offers and improving their standing in the eyes of consumers. If done correctly, reward programs can be a pretty powerful tool for banks. These programs can take on a variety of different forms, aiming to attract a wide breadth of clients.
One creative reward program currently offered is linked with Bank of America’s Major League Baseball checking account and credit card. When customers sign up for this service, they receive a card personalized to match their favorite team that can get them 20% off at the official MLB online store. The credit card also earns “Extra Bases rewards points” that can be redeemed for team merchandise, game tickets and even special MLB experiences.
Reward programs like this target a very specific type of consumer: the sports nut. The sports nut lives, eats, sleeps and breathes their sport of choice and Bank of America has tapped into this demographic very efficiently. This MLB checking account and credit card are unique to Bank of America and differentiates the bank as it targets new and existing customers. It also helps foster a personal relationship with customers because it is targeting what they are passionate about. People may not remember the exact interest rate on the credit card, but they’ll remember that the card has the logo of their favorite team right next to the Bank of America logo.
Another rewards program, which aims to attract a different kind of loyalty, is Citibank’s Thank-You points. For most customers, they earn Thank-You points by making purchases with their Citi credit or debit card. However, customers can also earn more points by increasing their interaction with the bank, such as through opening more financial accounts. These points can be redeemed for a variety of items, including iPods, cameras, books and DVDs.
The Thank-You points program is aimed at a more general audience than the MLB accounts. Its aim is to build loyalty by providing incentives for customers to have all of their accounts with one bank, Citi. Though Thank-You points aren’t as targeted as the Extra Bases points, they are flexible enough to appeal to a wide range of customers. For one, Thank-You points can be used to donate money to charities and disaster relief efforts, which appeals to philanthropists. By having this donation option, it also allows the customer feel good both about their donations and towards the bank that provided this option, which can lead to greater loyalty with the bank.
Regardless of the reward program, it is obvious that customers are more likely to engage a certain bank or credit card if they will be rewarded. This engagement can be quite valuable to a bank. Research done by the Aite Group has found that, out of these “engaged” customers, 41% recommended their bank to friends and family and they are five times more likely to open more accounts with the bank. The opening of more accounts is especially valuable to banks because they make the most money from larger financial commitments like mortgages, loans and long-term deposits.
While reward programs may seem like a win-win scenario for both the bank and the consumer, it’s not that simple any more. Reward programs are expensive for banks because, often, they aren’t as targeted as the MLB credit card and a bank can’t afford to offer a specialized card for every type of person. This has led to banks decreasing the value of rewards, which has made many customers frustrated with confusing redemption terms and the disappearance of their points.
To win back customer loyalty, banks are evolving their programs to better provide offers that appeal to their customers. BillShrink’s StatementRewards is one such way banks are changing their rewards, allowing personalized offers to appear on online statements based on past spending. Be on the look out for other innovative ways banks are trying to as rewards to their customers.